Problem
Leaf Men's Wear
You are the Logistics Manager of Leaf Mens Wear which is a small manufacturer of various products in Mississauga and produces 30 products that have gained a good success in Canadian and US markets. One of Leaf's successful products is an organic herbal soap that is highly demanded in and regularly shipped to Edmonton, Vancouver, Winnipeg, Montreal and Windsor. Facing such high market demand, Leaf Mens Wear is considering expanding its soap production line, but currently will have to distribute its monthly production between these markets. As a result, Leaf's shipping schedule is budgeted according to the following table:
Vancouver Edmonton Winnepeg Montreal Windsor
100 lbs. 5 shipments 4 shipments 4 shipments 2 shipments 2 shipments
200 lbs. 4 shipments 4 shipments 4 shipments 4 shipments 3 shipments
500 lbs. 4 shipments 5 shipments 2 shipments 2 shipments 3 shipments
1000lbs. 4 shipments 0 2 shipments 0 0
Leaf Mens Wear has requested quotes from nine trucking companies out of which four have been shortlisted for contract. The following shows the quotes received from the four trucking companies which are all in dollars per cwt:
Based on the production line expansion plans of the company, the sales department is finalizing long term sales contracts which will increase sales to Vancouver, Edmonton, Winnipeg and Montreal. The projected changes to the sales volumes are summarized in the following table:
Vancouver Edmonton Winnipeg Montreal
Current Sales ($Mn) 2.585 1.68 1.68 1.071
Future Sales ($Mn) 4.134 2.352 2.52 1.927
Leaf's VP-Finance projected that the new sales prices offered to secure the above deals would reduce your allocated annual operation budget by $10,122. This means you will have a tighter budget to manage the transportation of products to these markets.
Task:
i. Without considering the changes in production and sales, which one(s) of the transportation companies will you sign contract with for these four markets?
ii. How would the new sales affect your shipping plans?
iii. How would you adjust your costs to meet the future reduced budget you will have?